Hunter Harrison's vision for improving CP

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Hunter Harrison's vision for improving Canadian Pacific Railway Ltd. includes a strategy that has the potential to transform two major rail corridors in Canada: more co-operation with its closest rival.

While he has yet to detail which areas he's targeting, industry experts say CP and Canadian National Railway Co. would benefit from co-operating on the Toronto-Montreal corridor, as well as the Edmonton-Saskatoon-Winnipeg route. On the Toronto-Montreal section, the prospect of freight integration raises the tantalizing possibility of faster passenger rail service.

Mr. Harrison, CN's former top executive, is a proponent of "co-production," the industry term for rivals working together along certain stretches of tracks in order to reduce bottlenecks and move goods more efficiently.

Mr. Harrison said 25 per cent of CP's network overlaps with CN's, leaving the two companies with plenty of opportunities to co-ordinate freight deliveries by making better use of tracks and rail yards.

Canada's two largest railways have discussed collaboration in the past, but "there were a lot of things left on the table," Mr. Harrison said in an interview this week.

Greg Gormick, a transportation policy consultant, said CP and CN have a strong case to make that joint operating agreements are good for the economy while maintaining competition for shippers. "You would get a smoother flow of traffic and lower operating costs, too," he said.

Calgary-based CP and Montreal-based CN will be borrowing a page from the telecommunications sector. In November, 2009, Bell and Telus jointly launched an advanced wireless network for smartphones, notably iPhones, allowing the rival companies to team up to share back-end costs while still competing for customers.

CP, which is Canada's second-largest railway, has resisted the push for increased co-operation in the past because of concerns that it might trigger concerns with competition regulators, say industry sources, who estimate that the CP-CN overlap in North America is 50 per cent, or double Mr. Harrison's figure.

Bob Ballantyne, chairman of the Coalition of Rail Shippers, is one of the most vocal critics of the two railways, but he sees some potential benefits in working collectively. If CP and CN are able to shave costs by operating more efficiently in areas where their tracks run relatively close together, then shippers stand to gain from more competitive freight rates, he said.

CP and CN already co-ordinate schedules at the Port of Vancouver, and on the route between Vancouver and Kamloops, B.C.

The Toronto-Montreal corridor holds promise because if CP and CN are able to share tracks, it will speed up freight deliveries and have the bonus of freeing up more room for Via Rail to improve passenger service without huge capital outlays for new Via locomotives, rail cars and new tracks, Mr. Gormick said.

While it wouldn't be "high-speed" service, Via could potentially carry passengers from Toronto to Montreal in three hours, shaving off more than 90 minutes from the current fastest available schedule. To hit the three-hour target, the existing tracks would need to be upgraded and dedicated for Via, instead of shared with CN's freight operations, he said.

On the Edmonton-Saskatoon-Winnipeg route, under an integrated scenario, CP and CN would be able to run on each other's networks to overcome the inevitable delays that stem from operating over vast stretches of land where there are only single tracks.

Most of CP's network is single-tracked, meaning trains have to take turns going in each direction, aided by sidings – sections of track located to the side of main rail lines. Those sidings give workers more flexibility to repositioning trains quickly. But having a double-track system with sidings would be more efficient.